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Allottees of cancelled coal blocks to be compensated

November 5, 2014

Following the promulgation of the Coal Mines (Special Provisions) Ordinance, 2014, on October 21, the Ministry of Coal has sought details of land and mine infrastructure from the allottees of the 204 coal blocks whose allocations were quashed by the Supreme Court. The information will be used by the government for deciding the quantum of compensation to be paid to the prior allottees for investments made by them towards land and mine infrastructure.

The Coal Mines (Special Provisions) Ordinance, 2014, has a provision for valuation of compensation for payment to prior allottees. Under the provision, the quantum of compensation for the land in relation to Schedule I coal mines will be as per the registered sale deeds lodged with the nominated authority, together with 12 per cent simple interest from the date of such purchase or acquisition, till the date of the execution of the vesting order or the allotment order.

The quantum of compensation for the mine infrastructure in relation to Schedule I coal mines will be determined as per the written down value reflected in the statutorily audited balance sheet of the previous financial year. In the event a prior allottee of any of the Schedule I coal mines becomes the successful bidder or allottee through participation in the auction process, then the compensation payable to such successful bidder or allottee will be set off or adjusted against the auction sum or the allotment sum payable by such successful bidder or allottee, as the case may be, for any of the Schedule I coal mines. The prior allottee will not be entitled to compensation till the additional levy has been paid. The Supreme Court has determined the additional levy at Rs. 295 for every metric tonne of coal extracted.

Schedule I coal mines in the Ordinance refer to the coal mines and coal blocks whose allocations had been cancelled by the Supreme Court judgment dated August 25, 2014, and its order dated September 24, 2014, passed in a writ petition (criminal) of 2012, and include those allotments which may have been de-allocated prior to and during the pendency of the writ petition. The Schedule I coal mines were allotted between 1993 and 2011 but cancelled pursuant to the Supreme Court judgment.

The 204 coal blocks whose allocation had been quashed by the Supreme Court include 37 coal blocks that are under production and five coal blocks likely to come under production. In case of these 42 coal blocks, the cancellation of allocation comes into effect from April 1, 2015.

In a letter dated October 24, 2014, the Ministry of Coal requested the prior allottees of the 204 coal blocks to provide details of land owned as on October 21, 2014, for coal mining operations including information with regard to location of the land, area, date of purchase and cost at the time of purchase. The letter also sought details of the mine infrastructure including its value as reflected in the statutorily audited balance sheet for 2013-14. The information needs to be provided by November 10, 2014, failing which the Ministry of Coal will presume that no investment had been made towards land and mine infrastructure by the prior allottee.

As per the ordinance, mine infrastructure includes tangible assets used for coal mining operations such as civil works, workshops, immovable coal winning equipment, foundations, embankments, pavements, electrical systems, communication systems, relief centres, site administrative offices, fixed installations, coal handling arrangements, crushing and conveying systems, railway sidings, pits, shafts, inclines, underground transport systems, hauling systems, (except movable equipment unless the same is embedded in land for permanent beneficial enjoyment thereof), land demarcated for afforestation and land for rehabilitation and re-settlement of persons affected by coal mining operations under the relevant law.

The Coal Mines (Special Provisions) Ordinance, 2014, provides for allocation of coal mines and vesting of the right, title and interest in and over the land and mine infrastructure together with mining leases to successful bidders and allottees with a view to ensure continuity in coal mining operations and production of coal, and for promoting optimum utilisation of coal resources consistent with the requirement of the country.
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